Speaking to the Sunday Express last night, Lord Robertson said: “I'm in favour of some of the overseas aid budget being transferred to the MoD, but including the foreign aid budget in defence spending is just sleight of hand. It’s double entry bookkeeping.

“The only reason we are currently meeting our 2 per cent commitment is because we are including operations. This was never the traditional way of calculating our Nato contribution.

"And even with operations, we will drop below 2 per cent next year, so now they're getting engaged in financial engineering to try to make out that we are meeting our commitments without actually increasing the defence budget.

Including the foreign aid budget in defence spending is just sleight of hand

Lord Robertson of Port Ellen

“The problem is that this doesn't satisfy Nato. There are planners in Nato who examine like for like spending, and they won't be taken in by people shuffling figures around.

“They know the reality.”

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Former Nato Secretary General Lord Robertson made the comments in an interview with the Express

It comes with David Cameron repeatedly refusing to promise his government will meet a Nato obligation to spend 2 per cent of GDP on defence despite protecting aid spending.

George Osborne confirmed £500 million cut in defence spending even before an official spending review later this year, which may add a further £1bn to the bill.

Lord Robertson added: “You've seen President Obama making it very clear during the G7 that Britain wasn't doing enough.

"Our relationship with the US is bound to diminish if we can't deliver what, in fact, was our lead item in our own Summit in our own country last year,

“My view is that they should financial engineering to the bankers. In defence terns what matters is protection of the allies and they'll not be taken in by a cheap three-card trick.

“In my time we spent well over 2 per cent of GDP on defence. Now there are huge problems in the world, not just with Russia, but with Middle East, China, migration in the Mediterranean – it’s a time of almost unprecedented tension.

"This is the worst time to reduce defence expenditure on this nations ultimate insurance policy, which is defence.”

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Nato troops have carried out a number of training exercises in eastern Europe

He added: “Foreign Aid is now pegged to GDP and it is going to leap up as the economy grows.

“What the Ministry of Defence needs is new money, not money classified as already being there.”

Though Foreign Aid can help to prevent problems in developing countries from exploding on to the world stage, poor management and corruption renders many schemes useless.

This week a Department for International Development report revealed that millions of pounds worth of foreign Aid spending had been classified at the bottom C rating, where “outputs substantially did not meet expectation”.

This included a £7.6m scheme to help provide information to help people halt the conflict in Sudan, which was stopped early after it was clear the country’s government was not co-operating fully in the project.

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Nato leaders met last year to diccuss the Ukraine civil war

DfID acknowledged it should have pulled the plug earlier.

Another scheme, worth £4m, helped to fund a scheme to encourage children to attend school in Sierra Leone by providing them with a hot school dinner.

But the project, run by the World Food Programme, was said to have “serious weaknesses” and suffered from “poor management and oversight” as well as a “lack of expertise”.

A paperwork error meant the project had £1m less than expected and a review found as more children joined the classes teaching became more difficult because there were so many students.

A £1.3m project to help AIDS sufferers in the Democratic Republic of Congo was halted after the agency in charge of spending the cash had failed to appoint a project manager almost a year into the scheme.

And a £100 project to encourage and promote trade in Southern Africa was axed after it was discovered that officials were paid inflated salaries and that expenses were not kept as low as they could be